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European Exchanges, Clearing and Settlement in a Period of Change

European Exchanges, Clearing and Settlement in a Period of Change. Dr. Heinrich Henckel CEO SWX Swiss Exchange Milano, 15 October 2001. Overview. Introduction Trends The needs of market participants Swiss Value Chain virt-x Clearing and Settlement Outlook.

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European Exchanges, Clearing and Settlement in a Period of Change

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  1. European Exchanges, Clearing and Settlement in a Period of Change Dr. Heinrich Henckel CEO SWX Swiss Exchange Milano, 15 October 2001

  2. Overview Introduction Trends The needs of market participants Swiss Value Chain virt-x Clearing and Settlement Outlook

  3. IntroductionEuropean markets – fragmented & slowly consolidating More than 30 spot exchanges and over20 futures exchanges EU harmonisation –Investment Services Directive –Introduction of the Euro Trend from national to sectoral investments Increase in crossborder (equity) trading, over 60% of which transacted in London

  4. Market environment: trends... Trading beeing conducted electronically Costs as a key competitive factor among market participants Consolidation of market players (banks, securities dealers) New competitors: –ECNs / ATSs –Securities dealers (brokers) are “internalising” order flows Issuers: statutory domicile and listing drifting apart

  5. …and challenges for Exchanges Differentiation along product lines is increasingly difficult Dependency on a few very liquid securities Market fees can be compared at a global level The professional investor community thinks globally, whereasthe infrastructure is still organised locally Exchanges vying for mermbers and products Economies of scale - a must, also for exchanges and clearing & settlement organisations

  6. Clearing & SettlementEquities in Europe (Summer 2001) Trading LSE(UK) virt-x SWX(CH) BIt(IT) Euronext(FR, BE, NL) DB(DE) Phase 1: bilateral settlement (without CCP) Clearing LCH Cassa Clearnet Eurex Cl. Other markets (ICSD) Other markets (ICSD) other markets (ICSD) The Settlement Network TSN Euroclear Bank Clearstream Euroclear (CBL) Settlement CrestCo SIS (Sicovam) DTCC MT (BXS/CIK) (Necigef) (CBF) GBP(BoE) EUR(CHAPS/CBI) CHF(SIC) EUR(euroSIC) EUR(BI) EUR(BdF) EUR(LZBH) TARGET

  7. Needs of market participants as tosecurities trading systems Internationally accessible trading platforms Central order book Uniform set of rules (on- and off-order book) Robust and scalable technology Integrated, transnational clearing & settlement Transparency, anonymity Low costs LIQUIDITY

  8. The Swiss Value ChainReality today Investors SWX Swiss Exchange – Trading Platform Simultaneous, final, irrevocable delivery versus payment is the Swiss reality Trading, clearing and settlement fully integrated Significant reduction inback office costs Open access, also for remote participants Competitive transaction costs throughout value chain High degree of automation: enables Internet access SIS SEGAINTERSETTLEAG– Clearing and Settlement SIC AG – Payments Systems Banks & Brokers SIC/SNBSIC SIS/x-clear SECOM SIC/SECBeuroSIC SWX Platform

  9. The Swiss Value ChainThe European Dimension SIC/SNBSIC SIS/x-clear SECOM SIC/SECBeuroSIC SWX/virt-x Platform • Fully multi-currency • Robust, scalable platform • On and off order book trading • Full range of instruments (equities, bonds, derivatives) • Fully-integrated clearing & settlement instructions • virt-x exchange organisation established in UK • Fully multi-currency • Robust, scalable platform • Full range of instrument including repos • Automated DVP links to CRESTCo (UK), Euroclear (ICSD), Clearstream Luxembourg (ICSD) and Clearstream Frankfurt (DE) • RTGS system • SNB (CHF) • SECB (EUR) based in DE • euroSIC fully integrated with TARGET (EU) and RTGS+ Systems (DE)

  10. virt-x MembersSeptember 2001 (Total 115)

  11. virt-x TurnoverSince launch

  12. virt-x Market ShareTurnover of European Indices

  13. virt-x Clearing & SettlementPhase 2 Model Exchange matched trades sent for clearing & settlement virt-x Trading Clearing Central counterparty Risk management Anonymity Settlement assurance Concentrator for netting LCH x-clear GCMs GCMs SIS Crest Euroclear Member choice ofsettlement venue Settlement

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